A turn in the list of Willful Defaulters for the worse

A turn in the list of Willful Defaulters for the worse

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  • Indian banks classified ₹28,784 crore of loans as wilful defaults in the April-December period of 2020, when the coronavirus pandemic swept across India, up from ₹23,783 crore a year ago.
  • A bank can label a borrower as a wilful defaulter if a loan is not repaid despite having the means to repay, and also when the loan is used for a purpose different from what it was taken for.
  • According to the latest data on suit-filed accounts from credit bureau TransUnion Cibil, the total outstanding wilful default as of 31 December now stands at ₹2.4 trillion.
  • India’s largest lender, State Bank of India (SBI), accounts for ₹62,709 crore in this, adding ₹18,026 crore in the AprilDecember 2020 period alone.
  • Lawyers and stressed asset experts said that even before the pandemic, several lenders used the wilful defaulter tag as a pressure tactic to force borrowers to pay up, and the practice grew in FY21 after the Insolvency and Bankruptcy Code (IBC) remained suspended.
  • A borrower labelled a wilful defaulter cannot access institutional finance to float new ventures for five years after his name is removed from the list of wilful defaulters.
  • An Insolvency Lawyer says that his clients have been threatened with the wilful defaulter tag for simply missing repayments. Moreover, with the IBC being suspended, such instances rose last year, the suspension of the bankruptcy code was lifted on 31 March.

With nearly a quarter of all bank loans made to individuals and businesses in Maharashtra, the state also accounts for the largest share of wilful defaulters. Maharashtra accounts for ₹86,163 crore in wilful defaults, followed by Delhi at ₹32,620 crore and West Bengal at ₹23,877 crore.

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